Don’t Let the IRS Surprise You: What you need to know About Estimated Tax Payments.

What Are Estimated Tax Payments?    

The U.S. income tax system is a “pay-as-you-go” system. That means the government expects you to pay taxes on your income as you earn it—not just when you file your return in April. If taxes aren’t being withheld from your income (like they are for most employees), you may need to make direct payments to the IRS. These are called estimated tax payments.

Who Needs to Make Estimated Payments? 

If you’ve ever owed a surprise tax bill, there’s a good chance the culprit was incorrect tax withholding. While many people assume tax withholding is a “set-it-and-forget-it” system, the reality is a lot messier—and more frustrating. Even experienced professionals sometimes struggle to get it just right.

You might need to make estimated payments if you:

*Are self-employed or run a small business

*Do gig work (Uber, DoorDash, freelancing, etc.)

*Have rental income, investment income, or retirement income

*Got a big payout from selling a home, stock, or other asset

*Don’t have enough tax withheld from your paycheck or retirement distributions

A good rule of thumb: If you expect to owe at least $1,000 in federal tax when you file your return, or your tax isn’t being covered through withholding, you likely need to make estimated payments.

This Article was written By Paul Allen CFP®, MQFP®

Watch Paul’s detailed explanation—highly recommended!

Getting Your Tax Withholding (Mostly) Right

What Is Tax Withholding? 

Put simply, tax withholding is the amount your employer (or pension provider, or Social Security, etc.) takes out of each paycheck and sends to the IRS on your behalf. This amount counts toward the taxes you owe for the year. By April 15, you either owe the IRS more—or get a refund if you overpaid.

Why Does It Matter? 

Because the IRS expects taxes to be paid as income is earned, not just when you file your return. If you underpay by too much, you could face penalties, even if you catch up by April. On the other hand, if you overpay too much, you’ve just given the government an interest-free loan.

Why Is It So Hard to Get Right? 

Life is complicated. Tax withholding gets tricky when:

You have multiple sources of income (like two working spouses or a pension and a job)

You experience life changes (marriage, new child, retirement)

Your deductions or credits change year to year

Let’s look at a scenario involving a married couple filing jointly with three sources of income. Both spouses have income from work and one spouse also has income from a military pension. For simplicity, the amount of income from each job and the pension is the same – $50,000. Neither employer nor DFAS knows this couple is receiving income from 2 other sources. Thus, each of them concludes the couple’s gross income is $50,000. They apply the standard deduction of (roughly) $30,000 and assume the couple’s taxable income will be $20,000. This puts them in the 10% tax bracket; thus, each income provider will withhold $2,000 for the year, for a total of $6,000 in total withholding.

When this couple prepares their tax return, they will add the 3 incomes for a gross income of $150,000. They apply the (roughly) $30,000 standard deduction and their taxable income is $120,000. In 2025, the tax for $120,000 is $16,228. That’s a $10,000 shortfall.

How to Get It (Mostly) Right 

There’s no silver bullet, but there is an approach that will get it mostly right:

Start with your total expected tax bill. Use last year’s tax return as a starting point. Adjust if your income or deductions have changed.

Divide that number by the number of paychecks you’ll receive. This gives you a target for how much should be withheld each period.

Adjust your W-4 form(s) to increase withholding at each job or pension.

Check back in 1–2 pay periods. Make sure the right amount is being withheld. If not, file another W-4 to fine-tune.

For example, if your target withholding is $16,228 and you’re paid twice a month, you’d want about $676 withheld each pay period. You can also spread out the difference by increasing withholding across each source of income.

This Article was written By Paul Allen CFP®, MQFP®

Paul offers an excellent explanation in this video—take a look!

Take Charge: 10 Smart Financial Moves for a Successful Military Transition

Here are ten smart financial moves to get you started

1. Know Your Transition Timeline: Attend Transition Assistance Program (TAP) as soon as you’re eligible and go more than once. Attend with your spouse if possible. Work together to map out key dates such as retirement or separation, terminal leave, and job or school start dates. This will help you plan your cash flow and avoid surprises. Know the critical events and family occasions that may need to be factored into your timeline. https://www.dodtap.mil/dodtap/app/home

2. Build a Transition Emergency Fund: Aim to save 6–12 months of living expenses. Your emergency fund will buffer you against any income gaps during your transition. Start now if you haven’t yet started. The best time to plant a tree was 20 years ago. The next best time is NOW!

3. Track Your Current Expenses: Understand your current spending and build or revisit your budget. Identify military benefits like BAH, BAS, and COLA that will end, and plan how to replace or adjust for them in your new or projected budget.

4. Understand Your Final Paycheck and Benefits: Know how and when your final pay, terminal leave, and any separation bonuses will be paid out. This will help you plan your finances during the transition period.

5. Project Civilian Income vs. Military Pay: Research civilian salaries and benefits and compare them with your current total military compensation. Remember, some military benefits (like BAH and BAS) are not taxed, so you may see a change in your taxable income. Bookmark this page to calculate and review your Regular Military Compensation. https://militarypay.defense.gov/calculators/rmc-calculator/

6. Plan for Health and Dental Insurance: Familiarize yourself with TRICARE benefits based on your eligibility and or research employer plans and marketplace options. Be sure to budget for premiums and out-of-pocket costs.

7. Manage Debt: Pay down high-interest debt before you transition and avoid taking on new debt during this uncertain period. Remember, future employers may check your credit, so make sure your report is accurate.

8. Understand Retirement Pay & Benefits: If you’re eligible for military retirement pay, VA Disability Compensation, or the Post-9/11 GI Bill, understand the timing and amounts. If not, plan to replace that income. Consider the loss of Servicemembers Group Life Insurance (SGLI) and start researching the cost of replacing life insurance. Use benefits you have available on installation while you can, especially if you’re separating.

9. Maximize TSP Contributions: Continue contributing to your Thrift Savings Plan (TSP) while you’re still in service, especially if you’re receiving matching contributions. Avoid withdrawals and discuss the tax implications with a tax professional.

10. Meet with a Financial Counselor: Planning for the unknown can be challenging, but working with an experienced Financial Counselor can help you avoid costly mistakes and set your transition up for success. Take the time to review your budget and transition plan with a professional who can offer valuable insights tailored to your situation.

This Article was written By Priscilla Schrubb AFC®

Watch out!

Top Credit Report Errors and How to Fix Them 

 1-Incorrect Personal Information: 

Error – This could include misspellings of your name, wrong address or inaccurate Social Security Number.

Impact – This can cause your credit file to get mixed up with someone else’s leading to incorrect credit histories being applied to your record.

 2-Accounts That Don’t Belong to You:

Error – Loans or credit cards you never opened.

Impact – This could be a sign of identity theft or simple data entry error.

3-Duplicate Accounts 

Error – The same debt may be listed more than once.

Impact – This may appear that you have more debt than you really do, which will hurt your credit score.

4- Incorrect Account Status 

Error – This could include misspellings of your name, wrong address or inaccurate Social Security Number.

Impact – This can cause your credit file to get mixed up with someone else’s leading to incorrect credit histories being applied to your record.

5- Outdated Information 

Error – Loans or credit cards you never opened.

Impact – This could be a sign of identity theft or simple data entry error.

How to Fix your Credit Report Errors: 

 1-Obtain a copy of your Credit Report by visiting AnnualCreditReport.com.  This site allows you to obtain your credit report annually from each of the 3 reporting bureaus (Equifax, TransUnion and Experian).

2-Review for Errors 

3-Gather Documentation.  This includes billing statements, bank records, identity verification documents and letters from creditors that can be used to correct the error(s).

4-File a Dispute.  Dispute can be filed by mail, phone or online at each of the credit bureaus.

5-Follow Up.  Typically credit bureaus have 30 days to investigate and respond in which you will receive a notification with the results.  It is recommended to obtain a new credit report at this time to verify corrections.  If you do not receive notification, you need to follow up.

This Article was written By Andria Nichols AFC®

    Navigate Your Finances with Confidence.

You don’t have to manage complex financial situations alone. Our coaching and counseling services at PIM TAX are here to give you the support you need. Book an appointment and let us help you:

  • Fix Your Credit: We’ll guide you in identifying and correcting costly errors on your credit report.

  • Optimize Your Taxes: We’ll review your tax withholding to help you avoid penalties and surprises.

  • Plan for Transitions: Get a trusted “second set of eyes” on your financial plan during major life changes.

Don’t stay overwhelmed. Let’s work together!

Book your appointment HERE